University Assignment: Business Level Strategy Case Study - Lululemon

This case study analyzes Lululemon Athletica Inc.'s business level strategy, focusing on the challenges the company faced regarding quality control and customer satisfaction. The analysis includes a SWOT assessment, competitive analysis comparing Lululemon to Under Armour, Nike, and Adidas, and an examination of the company's core competencies using the VRIO framework. The report details the primary and secondary activities within Lululemon's value chain, identifying key issues such as declining product quality, poor customer service, and social media scandals. The study presents alternative solutions, including quality improvements, employee training, product diversification, and improved social media presence, while also evaluating the risks and proposing a contingency plan to mitigate potential setbacks. The goal is to provide insights into improving operational aspects and maintaining customer trust and loyalty in the athletic apparel market.

Running head: BUSINESS LEVEL STRATEGY
BUSINESS LEVEL STRATEGY
Name of the student
Name of the university
Author note

1BUSINESS LEVEL STRATEGY
Executive Summary
The research aimed at identifying the different concerns that are being encountered by
Lululemon Athleticainc and the manner in which the quality related concerns affected the
capability of the organization in retaining the trust and commitment of the customers towards
their propositions. The research developed a SWOT assessment and identified the core
competencies of the organization. Moreover, the competitiveness of the other firms were
analyzed by in the research for delineating the position of the concerned venture in the markets.
The depreciating quality standards and the absence of effective customer assistance incapacitated
the organization in retaining the trust and loyalty of the customers. Moreover, the social media
scandalizing affected the brand image of the venture. Therefore, the research report developed a
range of alternative solutions and selected the best solution that might be implemented in the
organizational design for upholding the success factors. Moreover, the research also developed
cognition on the risks that might be encountered by the organization while implementing the
change and the manner in which the organization might take the initiative of planning on the
contingency. Therefore, the overall report aimed at identifying the probable activities that might
be considered by a organization with the purpose of improving the operational aspects.

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SWOT Analysis
Strengths
 Premium brand
 High brand image in the markets
 Improved ;financial status
 Developed R&D operations
Weaknesses
 High price of the propositions
 Increased operational expenses of the
organization
Opportunities
 Expansion in the emerging economies
 Diversification of the line of
propositions in the market
Threats
 Poor customer assistance department
 Intense competition is being faced by
the organization while operating in the
markets.
Competitive Analysis
Under Armour
Under Armour Inc. was founded by Kevin Plan in the year 1996. Its headquarter is situated in
Baltimore, United States. Under Armour is one of the strongest sports brand and leader in
performance apparel industry that designs, manufactures and distributes footwear, performance
apparels and accessories for men, women and children. Under Armour sells its product lines
through different wholesale distribution and also sell directly to it consumers through own retail
stores and online. UA generated revenue of $5 billion in FY 2017. Under Armour is the top
competitor of Lululemon Athletic Inc.
Nike

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Nike is a multinational company founded in 1964 as Blue Ribbon Sports and in 1971 changed its
name as Nike Inc. Nike designs, manufactures, markets and sells variety of sports footwear,
apparels and related accessories for men, women and youth. Nike has a strong brand image and
global presence. Nike uses different wholesale channels, retail stores, online platform, license
channels and independent distributors to sell its products lines i.e. Nike, Jordan, Hurley and
Converse. Nike is one of the strongest Lululemon Competitor. Based on Nike’s financial data its
annual revenue is $38.1 billion. It operates 1182 stores globally out which 392 stores in the
United Stated and 790 international stores.
Adidas
Adidas is a German multinational corporation founded July 1924. Adidas has a strong global
presence. The company designs, manufactures and markets sports footwear, clothing and related
accessories. Back in 2005 Adidas acquired Reebok for 3.8 billion dollar. The company employs
57000 people from 100 different countries. Every year the company manufacture 900 million
sports and lifestyle products with the help of its independent manufacturing partners. Adidas
annual revenue is €21.218 billion for the year 2017 and strong competitor of Lululemon.

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High quality
Low price High price
Low quality
Core Competencies
VRIO
Attributes Valuable Rare Inimitable Organized
Brand image Yes Yes No Yes
Customer
experience
Yes No No Yes
Skilled
workforce
Yes Yes Yes Yes
Financial
resources
Yes No No Yes
R&D operations Yes Yes Yes No

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Customer
assistance
Yes Yes No No
Customer
loyalty
Yes No No Yes
Value chain analysis of the organization
Primary Activities
The primary value chain activities of Lululemon Athletica Inc are directly involved in producing
and selling the product to targeted customers. Analysis of primary value chain activities can
improve the performance of Lululemon Athletica Inc as explained below.
 Inbound Logistics
It is important to develop strong relationships with suppliers as their support is necessary to
receive, store and distribute the product. Without analysing the in-bound logistics, Lululemon
Athletica Inc can face various challenges in product development phases. Analysis of in-bound
logistics requires a company to focus on every aspect of transformation from raw material to
finished product. Some examples of inbound logistics are retrieving raw material, storing the
inputs and internally distributing the raw material and components to start production.
 Operations
The importance of analysing operational activities raises when raw material arrives, and
Lululemon Athletica Inc is ready to process the raw material into the end product and launch it in
the market. Some examples of operational activities are machining, packing, assembling and
testing. Equipment repair and maintenance also falls into this category.

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It includes both- manufacturing and service operations. Analysis of operational activities is
important for improving productivity, maximising the efficiency and ensuring the competitive
success of Lululemon Athletica Inc. The increased productivity can help Lululemon Athletica
Inc to achieve consistent economic growth, increase profitability and set a powerful basis for
competitive advantage.
 Outbound Logistics
Outbound logistics include the activities that deliver the product to the customer by passing
through different intermediaries. Some outbound logistics activities are material handling,
warehousing, scheduling, order processing, transporting and delivering to the destination.
Lululemon Athletica Inc can analyse and optimise the outbound logistics to explore competitive
advantage sources and achieve its business growth objectives.
Because, when outbound activities are timely managed with optimal costs and product delivery
processes put a minimum negative effect on the quality, it maximises the customer satisfaction
and increases growth opportunities for the firm. Lululemon Athletica Inc should pay specific
importance to its outbound value chain activities when its offered products are perishable and
require quick delivery to the end customer.
 Marketing and Sales
At this stage, Lululemon Athletica Inc will highlight the benefits and differentiation points of
offered products to persuade the customers that its offering is better than competitors. Only
producing a high quality product at affordable costs and distinctive features cannot create value
until Lululemon Athletica Inc invests on the marketing and sales activities. The sales agents and
marketers play an important role here.

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Some examples of Lululemon Athletica Inc's marketing and sales activities are- sales force,
advertising, promotional activities, pricing, channel selection, quoting and building relations with
channel members. The company can use the marketing funnel approach to structure its marketing
and sales activities. The marketing strategies can either be push or pull in nature, depending on
the Lululemon Athletica Inc’s business objectives, brand image, competitive dynamics and
current standing in the market.
Effective and wisely integrated marketing activities can develop the brand equity of Lululemon
Athletica Inc and help it stand out from the competition. However, Lululemon Athletica Inc must
avoid making false commitments about product features that cannot be fulfilled by the
production department. It indicates the need to ensure coordination between different value chain
activities.
 Services
The pre-sale and post-sale services offered by the Lululemon Athletica Inc will play an important
role in developing customer loyalty. The modern customers consider post-sale services as
important as marketing and promotional activities. The power of negative e-WOM due to poor
support service cannot be undermined in the current technologically advanced era. The company
must analyse its support activities to avoid damaging brand reputation, and instead use it as a
tool to spread positive word of mouth due to quick, timely and efficient support services.
Secondary Activities
The support activities play an important role in coordinating and facilitating the primary value
chain activities. Lululemon Athletica Inc can also benefit from analysis of its support activities
as explained below.

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 Firm infrastructure
The firm infrastructure denotes a range of activities, such as- quality management, legal matters
handling, accounting, financing, planning and strategic management. Effective infrastructure
management can allow Lululemon Athletica Inc to optimise the value of the whole value chain.
Lululemon Athletica Inc can control the infrastructure activities (or commonly called overhead
costs) to strengthen the competitive positioning in the market.
 Human resource management
Lululemon Athletica Inc can analyse human resource management by evaluating different HR
aspects, including- recruiting, selecting, training, rewarding, performance management and other
personnel management activities. The effective HR management can allow Lululemon Athletica
Inc to reduce competitive pressure based on motivation, commitment and skills of its workforce.
The company can also achieve its cost minimisation objectives by analysing hiring and training
costs with their relative return. The heavy dependence of Lululemon Athletica Inc on employees'
talent will increase the importance of this value chain support activity.
 Technology development
In a modern, technological advanced era, almost all value chain activities depend on
technological support. The technological integration in production, distribution, marketing and
human resource activities requires Lululemon Athletica Inc to realise the importance of
technology development. It can be divided into product and process technological development
activities. Some examples are- automation software, technology-supported customer service,
product design research and data analytics. The research and development department of
Lululemon Athletica Inc is classified in this category.

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 Procurement
The procurement in value chain denotes the processes involved in purchasing the inputs that may
range from equipment, machinery, raw material, supplies, raw material and other items necessary
for producing the finished product. Due to its linkage with multiple value chain activities,
Lululemon Athletica Inc should carefully consider its procurement activities to optimise the
inbound, operational and outbound value chain.
As mentioned above, the application of Porter Value Chain model depends on understanding the
importance of all activities. After understanding the relative importance of identified value chain
activities, Lululemon Athletica Inc should highlight areas where value can be added, cost
efficiency can be achieved, differentiation basis can be set, or processes can be optimised.
Problem Statement
The concerned organization, LululemonAthleticainc, encountered significant concerns in
retaining the commitment of the customers due to the absence of effective quality management
techniques.
Key Issues
 The decreased quality of the propositions
 Absence of effective customer assistance
 Drop in the sales volume
 Reduction in the annual earnings
 Social media scandalizing
The major issues that are being faced by the organization are based on the absence of
quality measures while providing the customers with diminished quality of customer assistance.

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It affected the loyalty and commitment of the customers towards the organization, minimizing
the sales volume of the same. The minimized value of the salesvolume in the organization
affected the capability of the venture in retaining their market position in the tock exchange.
Specifically the diminished quality of the LUON pants created a variety of issues for the venture
through loss of prospective customers, the reduced earnings and the loss of market share.
Moreover, the concerned organization also encountered significant issues due to the lack of
effective customer support professionals. The sheerness of the pants and the diminished
customer support based operations affected the capability of the organization in boosting their
sales volume. Therefore, while assessing the case of the concerned organization it might be
stated that the minimized quality of the offerings affected the competency of the same in
retaining the trust and loyalty of the customers.
Identification of Alternatives
The different alternatives that might be considered by the concerned organization are:
 Improving the quality of the propositions
 Training the employees for improving their customer support related operations
 Diversifying the propositions
 Improving the social media promotions
 Apologizing in the social media platforms
Evaluation of Alternatives
 Improving the quality of the propositions: The improvement in the quality of the
existing propositions would allow the organization in retaining the trust and commitment
of the customers. It has been observed that the organization aimed at developing yoga

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pants, which is required to be comfortable for the users. In this connection, the
improvement in the quality of the shape and the texture of the apparel would allow the
venture in improving the experience of the customers and retaining the commitment of
the same through elevated sales.
 Training the employees for improving their customer support related operations:
Training of the employees play an important role in improving their set of skills while
operating as per the common goals of the venture. Effective training and development of
the customer support executives would allow the venture in improving their scale of
operations while addressing the concerns of the clients.
 Diversifying the propositions: The diversification of the propositions would allow the
concerned organization in drawing the attentiob of the target range of customers towards
their valued proposition while operating as per the common goals of the venture.
Currently the organization proposed yoga pants, however, the diversification of product
strategy would allow the concerned organization in providing the customers with
different other propositions, thus widening the market scope.
 Improving the social media promotions: The improvement of the social media
promotions would allow the organization in increasing awareness among the target
audience while persuading the same in making a buy of the propositions. The increased
awareness through the utilization of diverse range of social media vehicles would allow
the organization in increasing the sales volume.
 Apologizing in the social media platforms: The organization might take the initiative of
apologizing for their behavioral and quality related issues to the customers through the
different social media channels. It would allow the organization in gaining back the